What We Read Today 22 May 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary “reading list” which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for “reading list” items are gratefully reviewed, although sometimes space limits the number included.

• Vietnam considers taking China to court (Demetri Sevastopulo, Financial Times) The Financial Times reports that Vietnamese Prime Minister Nguyen Tan Dung told Reuters his country was contemplating measures, including legal action by filing a case with the Permanent Court of Arbitration at The Hague. The Philippines has already a case pending against China in that court. The disputes are centered on China’s claim for sovereignty over the entire South China Sea which borders on several other countries. See GEI News for details.

• Oversubscribed JD.com prices its IPO at $19 a share (John Jannarone, CNBC) Hat tip to Marvin Clark. JD.com, which has been called the Amazon.com of China, priced its IPO (initial public offering) at $19 Wednesday night for its Thursday (22 May) IPO on NASDAQ. The company is expected to raise $1.78 billion. CNBC says the IPO is 15x oversubscribed which implies a big pop when trading starts. This stock will be closely watched for clues as to what might happen when the much bigger IPO for Alibaba (China’s E-bay – and then some) goes public in August. See GEI Investing outlook for the Alibaba IPO by GEI Associate Aura Gilham.

• China, Russia sign $400 billion gas deal (William Wan and Abigail Hauslohner, The Washington Post) Russia and China have signed a 30-year deal for the Chinese to purchase natural gas from Gazprom, the Russian government owned energy giant. This deal was reported as off for a while 24 hours ago by the Financial Times. (See next article.) This is viewed as clearly defining a new order in the world with China and Russia allied against the U.S. and Europe.

• China to delay Russia gas deal in blow to Putin (Lucy Hornby and Jamil Anderlini, Financial Times) Repeated from yesterday’s WWRT. Obviously the Financial Times got this one completely wrong. Russian president Vladimir Putin has been trying to show he has alternative markets for Russia’s energy exports as the Ukrainian crisis drags on. But China is not jumping for the bait. PetroChina, the listed subsidiary of state-owned China National Petroleum Corp, said Wednesday that a deal to import natural gas from Russia’s Gazprom would not be signed “in the near future”. It had been reported that Putin hoped to announce such a deal during a state visit to Beijing this week.

• China bans use of Microsoft’s Windows 8 on government computers (Paul Carsten, Reuters) The Central Government Procurement Center of China has issued the ban on installing Windows 8 on Chinese government computers. The reason, according to this article is security concerns and the reports that there are backdoor “hooks” in the OS (operating system) that can be exploited by the NSA (National Security Administration). Reuters says this is a blow to Microsoft’s attempts to improve its poor market position in China. The Verge reports that China will continue to buy Windows 7 from Microsoft.

• Commercial Mortgage-Backed Securities: Hot … But Very Dangerous (Keith Jurow, Advisor Perspectives dshort.com) Keith Jurow has contributed to GEI. There is a minefield waiting for CMBS (commercial mortgage backed securities) which mature 2015-2018 according to Jurow. These were written 2005-2008 with ten-year maturities at more than 100% TVT (loan to value). Real estate values have dropped from the credit bubble top so many of these properties are now even further underwater than when they were so carelessly underwritten. Just how this will affect the roll-over into new ten-year mortgages is problematic – there may be some defaults and there may be some adjustments (down) in principal in order to keep from suffering larger losses. Jurow cautions investors investing in distressed CRE need to be very thorough in their due diligence. See also Jurow’s recent article on CRE at GEI Analysis.

Today there are 13 articles discussed ‘behind the wall’.

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